McKesson Loses Bid to Offset Debt in Orexigen’s Bankruptcy Case

A three-way payment scheme involving Orexigen Therapeutics Inc., McKesson Corp., and a McKesson subsidiary doesn’t allow for any debt offsets in Orexigen’s bankruptcy case, the Third Circuit held on an issue of first impression.

Section 553 of the bankruptcy code lets a creditor reduce the amount it owes to a bankrupt debtor by offsetting what the debtor owes the creditor. But such “mutual” arrangements must be between two parties and not involve a third, the U.S. Court of Appeals for the Third Circuit said Friday.

The case centered around a distribution agreement under which McKesson could reduce what it owed ...